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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






2. Ed = (%dQd)/(%dP). Ignore negative sign






3. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






4. Exists if a producer can produce a good at lower opportunity cost than all other producers






5. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






6. The imbalance between limited productive resources and unlimited human wants






7. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






8. Ed > 1 - meaning consumers are price sensitive






9. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






10. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






11. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






12. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






13. Costs that change with the level of output. If output is zero - so are TVCs.






14. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






15. The additional benefit received from the consumption of the next unit of a good or service






16. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






17. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






18. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






19. Exists if a producer can produce more of a good than all other producers






20. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






21. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






22. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






23. Ed < 1






24. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






25. MUx / Px = MUy/Py or MUx/MUy = Px/Py






26. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






27. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






28. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






29. All firms maximize profit by producing where MR = MC






30. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






31. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






32. The difference between total revenue and total explicit costs






33. Entry of new firms shifts the cost curves for all firms upward






34. The most desirable alternative given up as the result of a decision






35. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






36. A firm that has market power in the factor market (a wage-setter)






37. The rational decision maker chooses an action if MB = MC






38. Exists at the point where the quantity supplied equals the quantity demanded






39. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






40. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






41. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






42. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






43. Entry (or exit) of firms does not shift the cost curves of firms in the industry






44. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






45. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






46. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






47. Entry of new firms shifts the cost curves for all firms downward






48. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






49. The ability to set the price above the perfectly competitive level






50. Ed = 8 - infinite change in demand to price change